Retirement leases, things to consider

22nd April 2017

A leasehold property is different to a freehold property as the property is owned subject to a lease. A lease provides provisions to deal with the relationship between all of the owners of the properties within a development as parts of the property (e.g; walls, foundations and roof) are shared. There may also be other communal facilities. The Landlord, who is the owner of the whole building and estate, has control of the management of the buildings, estate and facilities.

A retirement property will normally be a leasehold property as they tend to be flats and have communal facilities and are intended to be owned or sometimes only occupied by people over the age of 55 or 60.

When considering whether to purchase a retirement property there are several issues that needed to be considered.

The Lease is likely to have a clause in it regarding the minimum age of the owner or sometimes just the occupier of the property. You would need to make sure that you fit this requirement.

A Lease is granted for a specified length, normally 99 years or 125 years. When the property is sold the residue of the lease is transferred to the new buyer. This means that the term of the Lease transferred will be reduced and the length of the lease may need to be extended. This can only be done once you have owned the property for two years. Furthermore, the Landlord may require a premium for extending the lease.

When you are considering purchasing a retirement property you need to consider the level of care that you may require, not only now but in the future.

The services offered by the Landlord and the care provider/management company vary between schemes.

Some estates have a warden that lives on the estate or may only offer services during working hours and some may only visit the estate on a regular basis.

The cost of the warden and the type of the services that they offer make up a large proportion of the service charge that is payable. You should make enquiries of the services offered to make sure that this is adequate for your needs before you purchase the property including the services offered to you in the case of an emergency.

Some leases have a clause in them which state that on the sale or transfer of the property an ‘exit’ fee is payable to the Landlord by the vendor. The lease may set out the fee payable sometimes as a percentage but it can be up to the discretion of the Landlord.

You should obtain confirmation from the Landlord about the amount of any exit fee or how it is calculated before you put an offer in on the property in order that you can make an informed decision.

Most retirement properties are not able to be mortgaged due the nature of the properties, the age restriction of the owners or occupiers and the exit fees payable. If you intend to purchase the property with a mortgage you need to check with your mortgage broker or lender that your intended lender will lend on the property.

Some retirement properties can also be purchased on a shared ownership basis. A shared ownership property is where you purchase a share in the property from the Landlord and rent the other share from the Landlord. Your rights and obligations are different to those if you own the whole of the property. You should obtain specialist legal advice before you commit to purchase a shared ownership property.

This article does not go into detail on the risks of purchasing a leasehold property or a shared ownership property and is just to provide general advice on the relevant issues when purchasing a retirement property.

If you require more advice on buying a retirement property, a shared ownership property or a leasehold property generally please Talk to Tollers we will be able to provide you with more detailed advice and a quotation to deal with your transaction.

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